Yemen frees two suspected Hezbollah members after rebel advance -source

SANAA (Reuters) - Yemen has freed two suspected members of Lebanon's Hezbollah movement held for questioning about alleged ties to a Shi'ite Muslim insurgent group that has seized control of much of the capital Sanaa, a senior official said on Thursday.

The takeover by the Shi'ite Houthi rebels came hours before a power-sharing accord was signed with other political parties providing for the creation of a viable new government.

That effectively made the Houthis the main power brokers in Yemen, whose political, tribal and sectarian turmoil poses risks to No. 1 oil exporter Saudi Arabia next door.

The senior official said the authorities also expected to free at least three suspected members of Iran's Revolutionary Guards Corps (IRGC) with links to the Houthis, as well as nine Yemenis jailed for involvement in the smuggling of arms aboard an Iranian ship intercepted off the coast in January 2013.

U.S. and Yemeni officials said at the time the vessel, the Jihan 1, was carrying a cache of weapons, including surface-to-air missiles, being smuggled from Iran to insurgents in Yemen.

The official said the release of the Iranians and the Lebanese had been agreed with Tehran in a deal with Sanaa's security service that had been brokered by neighboring Oman.

No comment was immediately available from Omani or Iranian officials on the report.

Oman maintains close relations with Iran, serving periodically as a point of contact for Tehran with the West and had facilitated exchange of prisoners in the past.

Several Arab newspapers, including the London-based al-Quds al-Arabi, have reported that the suspected Hezbollah and IRGC members were detained earlier this year on suspicion of spying and providing training and logistical support for the Houthis.

"Two Hezbollah members were freed in Aden yesterday (Wednesday), and at least three Iranians will be freed today," the official, who declined to be named, told Reuters.

He said the deal stipulated that in return for the releases a planned Houthi assault on Sanaa would be averted.

But the Houthis, who hail from the Zaydi branch of Shi'ite Islam, went ahead anyway with their takeover of Sanaa on Sunday, after days of clashes with soldiers and armed men that they said were linked to the Sunni Muslim Islah party.

It was unclear why the releases went ahead despite the Houthis' advance, but it indicated that the Shi'ite rebels were now calling the shots and forcing President Abd-Rabbu Mansour Hadi's hand.

Hadi has accused Iran of meddling in Yemeni affairs and had asked his Iranian counterpart to stop backing unidentified armed groups in the country. Iran has denied such accusations, as well as any connection with the arms found aboard the Jihan 1.

Hadi warned Yemenis their country could be heading toward civil war with the Houthis' ascendancy. The Houthis have not made clear if the new deal will satisfy their demands or embolden them to seek further power.

Yemen is fragmented by tribal and sectarian divisions, and any renewed fighting could allow an array of other factions, including southern separatists, former autocratic president Ali Abdullah Saleh and even al Qaeda to take advantage.

(Reporting by Mohammed Ghobari; Writing by Sami Aboudi; Editing by William Maclean and Mark Heinrich)